Neo-Neon Holdings Limited 真明麗控股有限公司

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Neo-Neon Holdings Limited
(Incorporated in the Cayman Islands with limited liability)
(Stock code: 1868)
DISCLOSEABLE TRANSACTION
AGREEMENT WITH THE MANAGEMENT COMMITTEE OF
JIANGMEN INDUSTRIAL PARK
On 12 June 2010, Billion Choice, a wholly owned subsidiary of the Company, is entering
into an Agreement with the Management Committee of Jiangmen Industrial Park, a PRC
organization which is an independent third party, and pursuant to which, Billion Choice
agreed to establish a manufacturing plant in three phases to produce LED wafers and
chips for the aggregate capital commitment amount of RMB400,000,000 (equivalent to
approximately HK$453,800,000). Accordingly, upto 2013, Billion Choice will buy 60 metal
organic chemical vapor depositor (“MOCVD”) and the production capacity of the Company
will reach wafer 135,000 per month or 2,800 million chips per month and the annual
production output will reach RMB2,000 million. Also, the Company will receive a subsidy
of approximately RMB10 million for each MOCVD equipment purchased or approximately a
total of RMB600 million for total 60 MOCVD equipment purchased.
As the aggregate amount of (i) the Consideration and (ii) the Capital Commitment Amount
represent more than 5% but less than 25% of one of the applicable percentage ratios, the
transaction thereunder constitutes discloseable transactions for the Company under Rule
14.06(2) of the Listing Rules.
BACKGROUND
Globally, energy and environmental concerns are driving up demand for high efficiency, low
energy consumption products which in term have increased demand for LED lighting applications.
The Company is taking steps to increase its LED chip manufacturing capacities. On 12 June
2010 Billion Choice, a wholly owned subsidiary of the Company, is entering into an Agreement
with the Management Committee of Jiangmen Industrial Park, a PRC organization, and pursuant
to which, Billion Choice agreed to establish a manufacturing plant “Guangdong Silver Rain
Opto Semiconductors Limited” to produce LED wafers, packaging and illumination modules
for the aggregate capital commitment amount of RMB400,000,000 (equivalent to approximately
HK$453,800,000).
1

The progress of the Company’s LED chip/wafer and packaging factories has been expanded
smoothly. In 2008, the company introduced five (5) sets of blue and green lights extension
MOCVD and related production equipment. With a team of internationally renowned experts and
elites of the industry, the Company’s use of chips and SMD packaging techniques have continued
to improve.
In 2009, the LED high-power/low-power lighting chips and SMD packaging were verified and
approved by well-known Taiwan manufacturers of packaging and backlight module makers. The
Company’s LED chips, including 11 mil x 23 mil chips, and packaging technology have risen
to meet international standards. The brightness of the Company’s mass produced LED chips has
risen to an average of 2,100 mcd, which is comparable to the brightness level of 2,000 mcd to
2,200 mcd of the leading Taiwan backlight factories and higher than the 1,600 mcd to 1,900 mcd
of mainland China manufacturers. Because the brightness is already sufficient, the Company plans
to manufacture LED backlight chips in 2010, in particular, high-end large LED displays and wide
color gamut LCD backlight, etc. LED lighting and LED television will be the company’s strong
drive for future growth.
This year, the demand for LED chips has increased rapidly. Currently, prices for LED chips have
increased for more than 40% from approximately RMB950 to RMB1,200 per two (2) inches or
from RMB20 to RMB30 per thousand chips of decorative LED lights, while the Company’s exfactory
cost is RMB550 per two (2) inches and RMB14 per thousand chips. Accordingly, the gross
profit rate exceeds 50% and the net profit margin exceeds 40%.
AGREEMENT
Date
12 June 2010
Parties
Party A:
Party B:
The Management Committee of Jiangmen Industrial Park
Billion Choice Trading Limited
CONSIDERATION
The Board announces that on 12 June 2010, Billion Choice Trading Limited, a wholly owned
subsidiary of the Company, is entering into an Agreement with the Management Committee of
Jiangmen Industrial Park to invest and establish a wholly owned subsidiary company to produces
LED wafers and chips. The consideration for the investment will be RMB400,000,000 (equivalent
to approximately HK$453,800,000), which is determined after arm’s length negotiations between
the parties with reference to the market prices of establishing a manufacturing plant of similar
size and cost of purchasing MOCVD in the open market as determined by the Directors. The
Directors, including the non-executive Directors are of the view that the terms of the Agreement
are concluded after arm’s length negotiations under normal commercial terms and are fair and
reasonable and in the interest of the Company and the Shareholders as a whole.
2

The project will consist the purchasing of 60 sets of blue and green lights extension 31 pieces
or above MOCVD. The consideration will be payable in cash and cash equivalents on a deferred
basis by the Company to the MOCVD supplier and will be satisfied by the Company by its internal
resources. Among them, the first phase of 10 sets is scheduled to be installed and commenced
production in November 2010. The second phase of 20 sets (including 5 sets already installed in
Heshan Factory) are scheduled to be installed and commenced production during each month of
2011 and will be completed arrival on or before 20 October 2011, while the third phase of 30 sets
are scheduled to be installed and commenced production in each month of 2012. At full capacity in
2013, total 60 sets of MOCVD will produce 135,000 pieces of wafers and 2,800 million pieces of
chips per month, with annual production value reaching RMB2,000 million.
REASONS OF ENTERING INTO THE AGREEMENT
To meet the ever increasing LED product demand, the Company has decided to expand overall
production capacity and developing LED upstream business. As LED chips constitute the bulk
of the production cost of LED lightings, the Company plans to invest in a LED wafer plant in
Jiangmen Industrial Park, China. First phase of the plant will commence production in November
2010, and will be capable of reaching 25,000 pieces of wafers and 470 million pieces of LED chips
a month. The Company expects to lower the cost of LED end-products by an estimated 10% to
15%.
The Company expects demand for LED lighting products to grow substantially in the foreseeable
future. It sees bright prospects for the market with LED lighting products gaining market
acceptance and support from Jiangmen Industrial Park, which agreed to purchase LED enduse
products including LED streetlights, LED indoor and outdoor lighting products. Under
the agreement, Jiangmen Industrial Park agreed to grant a subsidy of approximately RMB10
million for each blue and green lights of extension 31 pieces or above MOCVD to the wholly
owned subsidiary company for each MOCVD purchased. Under the same agreement, the wholly
owned subsidiary will be entitled to 15% Enterprise Income Tax rate as a High-New Technology
Enterprise, adding further competitive advantage.
The Board considers that the Agreement was entered into on reasonable commercial terms, fair and
equitable, and in the interests of the shareholders of the Company as a whole and consistent with
the Company’s strategic direction.
LISTING RULES IMPLICATIONS
As the aggregate amount of (i) the Consideration and (ii) the Capital Commitment Amount
represent more than 5% but less than 25% of one of the applicable percentage ratios, the
transaction constitutes a discloseable transaction for the Company under the Listing Rules.
INFORMATION ON THE GROUP
The Company is an investment holding company and its principal activities are research &
development, sales and manufactures a wide range of lighting products such as incandescent
Lighting, LED decorative lighting, LED general lighting and entertainment lighting which are
used around the world, decorating millions of homes, landmarks, buildings, workplaces, shopping
centres, and alike.
3

The Company has expanded into LED chip manufacturing to strengthen its vertical integration
of LED industrial chain. By incorporating “Chips R&D – Extending slice production – Chips
production – Chips package – Product application”, Neo-Neon Holdings Limited is the only
company which has successfully completed vertically integration from the upper stream, middle
stream to the lower stream of enterprise supply chain in the LED industry of the world.
INFORMATION ON THE JIANGMEN INDUSTRIAL PARK
Profile of Jiangmen
Jiangmen located in the west of the Pearl River Delta, adjoining Zhongshan and Zhuhai in the
east, Yangjiang in the west, and Yunfu and Foshan in the north. Facing the South China Sea and
being adjacent to Hong Kong and Macao, it is a hub of communications connecting the west of
Guangdong and the southwest of China, especially Guangzhou, Hong Kong and Macao. It is also
an important gateway for water transportation in the West River valley. It has a total land area
of 9,541 km 2 (23% of the total area of the Pearl River Delta) and a population of 4.1 million.
Jiangmen is a city being well-known as the representative of fluorescent lamps, LED lighting
industry and semiconductor industry.
Management Committee of Jiangmen Industrial Park
The Management Committee has been approved by the municipal committee and municipal
government of Jiangmen, China to carry out management treatment, economic management and
supervision guide to investment in Jiangmen Industrial Park in terms of imports and exports, the
investment size, technology content, industrial categories, foreign economic and technological
cooperation.
Jiangmen Industrial Park is a provincial-level high-tech zone founded in February 1993. With
an area of 47.1 km 2 , the zone is divided to three parts includes a new and high-tech industrial
park, a port-surrounding industrial area, and a business service area. In the vicinity of the zone
are the three ports of Waihai, Gaosha, and Xinhui, which have access to Hong Kong, Macao,
and international ports. Jiangmen Industrial Park decides to develop the upper stream, middle
stream and lower stream in the LED industry, to expand the development and the core equipment
manufacture project of LED wafer and chip, the luminescent material and the back light, the
automobile electron and the solar energy. The establishment contains the technological innovation,
the product examination, the industrial consultation, the demonstration transaction and each kind
of necessary public service platform.
In October 2008, Guangdong Province’s Information Industry Department signed an agreement
with Jiangmen Municipal Government on speeding up the development of Jiangmen’s information
industry and awarded the title of “Guangdong’s Green (Semiconductor) Illumination Products
Base” to Jiangmen.
4

Preferential policies
The subsidy of MOCVD equipment
In view of the fact that Billion Choice is the first enterprise joint into the promotion of the
LED lighting project from the Management Committee of Jiangmen Industrial Park and the big
investment scale of the project as well as the investment intensity and high technology content, the
Management Committee of Jiangmen Industrial Park agreed to grant further preferential benefit to
Billion Choice as following:
(1) Under the national LED industrial policy, the arrival of Billion Choice’s 30 sets MOCVD
equipments to be completed by 2013 under third phase still can enjoy the subsidy of
approximately RMB10 million for each MOCVD purchased.
(2) Moreover, the arrival of total 60 sets MOCVD equipments within or before 2013, the
Management Committee of Jiangmen Industrial Park will give additional 2% preferential fund
of the actual costs of investment to Billion Choice to the extent of not excess RMB24 million
in total.
The MOCVD equipment subsidy payment method
The first phase 10 sets of MOCVD equipments will begin to install and start production since
November 2010 and the second phase 20 sets of MOCVD equipments (including existing 5 sets in
Heshan) will be expected in place for operations by 20 October 2011. In addition, the third phase
of 30 sets of MOCVD equipments will begin to install and start production in 2012. As total 60 sets
of MOCVD equipments will all in place for production, Billion Choice will receive approximately
a subsidy of RMB10 million for each MOCVD equipment purchased or a total of RMB600 million
for 60 MOCVD equipments purchased during the 4 years period from 2010 to 2013, of which
40% will be granted upon the Company’s delivery of the purchase contract and other materials
such as down payment and letter of credit facilities in relation to each newly purchased MOCVD,
30% will be granted when the MOCVD is delivered and the remaining 30% will be granted upon
commencement of operation of the MOCVD after the completion of the installation.
Procurement concessions
Public lighting of Jiangmen municipal administration and the park’s construction and
transformation will at first priority to purchase Silver Rain Opto’s LED products under the same
agreement, mainly includes the LED street light, the interior lighting and the outdoors LED
illumination products.
Land
Jiangmen Industrial Park provides industrial land of 100 acres, which has completed “seven-evenlyone”
(watering, circular telegram, circuit, accessible by postal communication, communication,
passes sewage, passes Internet). The first phase 50 acres with completion of preemptive work is
expected to reassign the land ownership to “Silver Rain Opto” within three months after signing
the agreement. The purchase price is RMB224,000 per acre.
Moreover, to provide for a good working environment, The Management Committee of Jiangmen
Industrial Park grants additional land of 20 acres to Billion Choice through bidding procedure for
commercial and employee residential purpose.
5

The Company’s subsidiary company “Heshan Lide Electronic Enterprise Limited” (Lide
Electronics), which has purchased 300 acres of land in Heshan and has completed 28,000 square
meters of production plant. To avoid duplicate investment, reduce its fund pressure, the Jiangmen
Industrial Park agrees to handle the following property:
(1) to grant land use right for the existing land of 300 acres located in Heshan;
(2) to grant property right for approximately 28,000 square meter of production plant;
(3) refers to this contract, to give a subsidy of RMB100 per square meters for additional plants
which will be constructed within 18 months.
The power supply system
Jiangmen Industrial Park undertake to provide dual route 3,000KVA on or before July 2010; and
will increase to 8,000KVA on or before September 2011; and will further increase to 15,000KVA
on or before 2013.
Enterprise income tax
Subject to the policy provision, Jiangmen Industrial Park undertake to exempt enterprise income
tax of the company “for two years free of charge and three years half”, in addition to enjoy 15%
Enterprise Income Tax rate as a High-New Technology Enterprise and favorable tax treatment
according to investment scale, technical content and industrial category.
TERMS USED IN THIS ANNOUNCEMENT
In this announcement, the following expressions have the following meanings, unless the context
otherwise requires:
“Agreement”
“Billion Choice”
“Board”
“Capital Commitment
Amount”
“Company”
The investment agreement in writing dated 12 June 2010 entered
into with the Management Committee of Jiangmen Industrial Park
Billion Choice Trading Company, a company incorporate with
British Virgin Islands, an investment holding company to invest in
the manufacturing plant in Yangzhou and Jiangmen and is a direct
wholly-owned subsidiary of the Company
The board of Directors
The commitment of Billion Choice to contribute to the registered
capital of the manufacturing plant in Jiangmen Industrial Park in
the total sum of RMB400,000,000 (equivalent to approximately
HK$453,800,000)
Neo-Neon Holdings Limited, a company incorporated in the
Cayman Islands whose registered office is at Cricket Square,
Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111,
Cayman Islands, and whose principal place of business in Hong
Kong is at 13/F, Tower A, New Mandarin Plaza, 14 Science
Museum Road, Kowloon, Hong Kong and the shares of which are
listed and traded on the Stock Exchange
6

“Consideration”
“Director(s)”
“Group”
“HK$”
“Hong Kong”
“Illumination”
“Independent Third Part(ies)”
“LED”
“LED Packaging”
“Listing Rules”
“MOCVD”
RMB400,000,000 (equivalent to approximately HK$453,800,000),
being the consideration for the Investment
The director(s) of the Company
The Company and its Subsidiaries
Hong Kong dollars, the lawful currency of Hong Kong
The Hong Kong Special Administrative Region of the PRC
The act of supplying with light
(an) independent third part(ies) not connected with the Directors,
chief executive or substantial shareholders of the Company or any
of its subsidiaries or their respective associates as defined in the
Listing Rules
Light Emitting Diode
LED packaging uses normal transparent epoxy resin. LED
Packaging Technology channels heat away via state-of-the-art
Micro Heat Pipes (MHP’s) that perform far more efficiently,
The properties of silicone materials make them ideal for new,
demanding applications such as protective encapsulates and lenses
for high-brightness on the efficiency of LED lighting
The Rules Governing the Listing of Securities on the Stock
Exchange
Metal Organic Chemical Vapor Deposition. MOCVD represents
a technique for depositing thin layers of atoms onto a
semiconductor wafer. Using MOCVD can build up many layers,
each of a precisely controlled thickness, to create a material which
has specific optical and electrical properties. Using this technique
it’s possible to build a range of semiconductor photodetectors
and lasers, the devices that lie at the heart of the information
revolution.
The principle of MOCVD: Atoms in crystal are combined
with complex organic gas molecules and passed over a hot
semiconductor wafer. The heat breaks up the molecules and
deposits the desired atoms on the surface, layer by layer. By
varying the composition of the gas, the properties of the crystal
can be changed at an almost atomic scale. It can grow high quality
semiconductor layers (as thin as a millionth of a millimeter) and
the crystal structure of these layers is perfectly aligned with that
of the substrate.
7

“Neo-Neon”
“PRC”
“RMB”
“Stock Exchange”
“Subsidiar(ies)”
“US Dollar” or “US$”
Neo-Neon Holdings Limited, a company incorporated in the
Cayman Islands whose registered office is at Cricket Square,
Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111,
Cayman Islands, and whose principal place of business in Hong
Kong is at 13/F, Tower A, New Mandarin Plaza, 14 Science
Museum Road, Kowloon, Hong Kong and the shares of which are
listed and traded on the Stock Exchange
The People’s Republic of China and for the purpose of this
announcement, excluding Hong Kong, the Macau Special
Administrative Region of the People’s Republic of China and
Taiwan
Renminbi, the lawful currency of the PRC
The Stock Exchange of Hong Kong Limited
Has the meaning ascribed thereto in section 2 of the Companies
Ordinance
United States dollar, the lawful currency of the United States of
America
“%” percentage
By order of the Board
Neo-Neon Holdings Limited
Ben FAN
Chairman
Hong Kong, 12 June 2010
As at the date of this announcement, the Board comprises: Mr. Ben FAN (Chairman), Ms. Michelle
WONG and Mr. FAN Pong Yang, all as executive directors; Mr. Leung Wai Chuen as non-executive
director; and Mr. WU Tak Lung, Mr. ZHAO Shan Xiang and Mr. Weng Shih Yuan, all as independent
non-executive directors.
8